ERC concludes DWRG public consultations
The Energy Regulatory Commission (ERC) conducted its second and final public consultation on the Distribution Wheeling Rates Guidelines (DWRG) on October 19, 2004. The DWRG will set the manner and criteria in determining the maximum distribution wheeling rates that may be charged by the DUs in providing distribution services to its customers. The meeting was attended by private Distribution Utilities (DUs) including Manila Electric Company (MERALCO), Davao Light and Power Company (DLPC), Cagayan Electric Power and Light Company, Inc. (CEPALCO), Dagupan Electric Corporation (DECORP), Visyan Electric Company, Inc. (VECO) and Cabanatuan Electric Corporation (CELCOR).
The second public consultation provided all interested parties the opportunity to discuss with ERC their comments on the second draft which incorporated the valid points raised during the first consultation. The comments focused on the technical and financial aspects of the Guidelines that are now being finalized. The comments and suggestions discussed include the timing for regulatory periods, the computation of the weighted average cost of capital (WACC), the determination of working capital, income tax adjustment, and asset valuation. The re-opening and adjustment of tariff events was also taken up.
All the comments and proposals were noted by ERC and will be considered in the final draft. This will be made available at the ERC website (www.erc.gov.ph) to give all interested stakeholders the chance to make their final comments before the final deliberation of the Commission.
ERC initiated the formulation of a new rate-setting methodology in pursuit of an internationally accepted rate-setting scheme that will be more responsive in ensuring reasonable and non-discriminatory electricity rates and promote regulatory stability as provided in Section 43(f) of the EPIRA.
A Performance Based Rate-setting (PBR) approach as suggested in the DWRG employs incentives to induce cost-cutting that is expected to result in lower electricity rates in the long term, encourage improvement and efficiency in service delivery and optimal use of assets, and provide more rational allocation of risks and rewards. It is a win-win proposition for both investors and consumers. Several jurisdictions like Victoria in Australia, Ontario in Canada and the United Kingdom have already adopted the PBR methodology.
October 27, 2004